New Zealand Deficit in the danger zone

National’s failed promise to rebalance the
economy has been shown in today’s current account figures,
with the deficit totalling $9.9 billion in the year to
September, says Labour’s Finance spokesperson David
Parker.

“John Key wants Kiwis to believe he is a good
economic manager. Yesterday a 33% increase in the cost of
superannuation over the next four years was ignored by him,
growth forecasts were further lowered, and unemployment was
predicted to stay higher for longer.

"Today's $10 billion
external deficit is further bad news. National has spent the
last 4 years trying to ignore its promise to rebalance the
economy, despite job losses in export industries and the
danger to our economy. Economists call it the external or
Current Account Deficit. I call it The New Zealand Deficit.

“Yesterday's forecasts show it’s set to get worse,
hitting -$17 billion in 2017. The IMF say New Zealand’s
external deficit will be second worst in the developed world
after Greece this year and worst bar none next year.

“A
widening external deficit combined with a stagnant economy
and high unemployment is a recipe for failure.

“As a
country we are spending more on our imports and interest
than we are earning from our exports. We have to sell more
assets or take on more debt to cover the costs. That means
our companies either go overseas or become less
competitive.

“The rules have changed since the global
financial crisis. There is far less tolerance for large
external deficits. The Government is ignoring this threat at
our peril.

“Bill English says there is little the
Government can do. He is wrong.

“Labour would increase
our savings through universal KiwiSaver, reducing our need
to borrow overseas. We would make sure those funds are
invested in high-growth exporting companies through tax
reform such as a capital gains tax and a research and
development tax credit, helping us earn more from overseas
and creating more export jobs.

“We would also require
the Reserve Bank to consider the exchange rate and other
important aspects of the economy, instead of the primacy of
inflation trumping exports. That will help make our currency
more competitive and stable, something exporters are crying
out for.

“These solutions are needed now. A massive New
Zealand Deficit will be a legacy of this National
Government.”

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